In Singapore, while most registered companies are required to submit annual financial statements and undergo audits, certain types of companies are eligible for audit exemptions. This means these companies are not required to engage an auditor approved by the Accounting and Corporate Regulatory Authority (ACRA) to perform an independent audit of their financial statements.
Eligibility Criteria for Small Company Audit Exemption
Statutory audits are typically mandatory for Singapore companies on an annual basis to comply with legislative requirements. Under Singapore law, all companies must appoint an auditor within three months of incorporation unless they qualify for an audit exemption.
Since July 1, 2015, the conditions for audit exemption have been revised. Previously, only exempt private companies with annual revenue not exceeding SGD 5 million could be exempted from audits. This standard has been replaced by the concept of a “small company.” Under the new rules, companies no longer need to be exempt private companies to apply for audit exemption.
Criteria for Recognizing Small Companies or Small Groups
To qualify as a “small company” or “small group” and enjoy audit exemptions, companies must meet the following conditions:
- The company is a private company: The company must be a private company during the relevant financial year.
- Fulfills at least two of the following quantitative criteria (applies for the past two consecutive financial years):
- Total annual revenue ≤ SGD 10 million
- Total assets ≤ SGD 10 million
- Number of employees ≤ 50
- Additional criteria for group companies (if applicable):
- The company qualifies as a small company.
- The entire group qualifies as a “small group.”
Frequently Asked Questions (Q&A)
Q1: Does the small company audit exemption apply to foreign companies?
A: The small company audit exemption only applies to companies registered in Singapore. However, when determining whether a company’s group qualifies as a small group, all entities within the group (including foreign entities) are considered to assess the group’s consolidated total revenue and total assets against the thresholds. Whether an entity belongs to a group is determined based on accounting standards.
- If the parent company prepares consolidated financial statements:
- “Consolidated total assets” and “consolidated revenue” should be determined according to the applicable accounting standards for the group.
- If the parent company does not prepare consolidated financial statements:
- “Consolidated total assets” refers to the sum of all group members’ assets.
- “Consolidated revenue” refers to the sum of all group members’ revenues.
Q2: Can a company with corporate shareholders qualify for the small company audit exemption?
A: Yes. Under the updated requirements, companies are no longer required to meet the “exempt private company” condition (which previously excluded companies with corporate shareholders). As long as the company meets the small company or small group criteria and is a private company, it can qualify for the audit exemption even if it has corporate shareholders.
Q3: Does the small company standard affect the obligation to file financial statements with ACRA?
A: No. The obligation to file financial statements depends on whether the company is a solvent exempt private company. The current standards for determining the filing obligation remain unchanged.
Q4: If the holding company audits the consolidated financial statements, does a subsidiary still need to audit its financial statements?
A: To qualify for the small company exemption, a subsidiary’s group must also qualify as a small group and meet the relevant thresholds on a consolidated basis. If the group does not qualify as a small group and the holding company is required to audit the consolidated financial statements, the subsidiary will not be eligible for the audit exemption.
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